The Governance of Migration Policy

Abstract

In this paper, I examine high-income country motives for restricting immigration. Abundant
evidence suggests that allowing labor to move from low-income to high-income countries would
yield substantial gains in global income. Yet, most high-income countries impose strict limits on
labor inflows and set their admission policies unilaterally. A core principle underlying the
World Trade Organization is reciprocity in tariff setting. When it comes to migration from poor
to rich countries, however, labor flows are rarely bidirectional, making reciprocity moot and
leaving labor importers with all the bargaining power. One motivation for barriers to labor
inflows is political pressure from groups that are hurt by immigration. Raising immigration
would depend on creating mechanisms to transfer income from those that immigration helps to
those that it hurts. Another motivation for immigration restrictions is that labor inflows from
abroad may exacerbate distortions in an economy associated with redistributive tax and transfer
policies. Making immigration more attractive would require creating mechanisms that limit the
negative fiscal impacts of labor inflows on natives. Fiscal distortions create an incentive for
receiving countries to screen immigrants according to their perceived economic impact. For high
skilled immigrants, screening can be based on educational degrees and professional credentials,
which are relatively easy to observe. For low skilled immigrants, illegal immigration represents
an imperfect but increasingly common screening device. For policy makers in labor-importing
nations, the modest benefits freer immigration brings may simply not be worth the political
hassle. To induce high-income countries to lower border barriers, they need to get more out of
the bargain.

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